After the Cream franchise is terminated, what geographic area does the non-competition covenant cover?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
For two years beginning on the date of termination or expiration of this Agreement, you and your owners agree not to (and to use each of your best efforts to cause each of your respective current and former spouses, immediate family members, owners, officers, directors, employees, representatives, affiliates, successors and assigns not to): (1) have any direct or indirect interest as an owner (whether of record, beneficially, or otherwise) in a Competitive Business; and/or (2) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, in each case, if such Competitive Business is located or operating:
- (a) within the Development Area, or
- (b) within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop.
If any person restricted by this Section fails to comply with these obligations as of the date of termination or expiration, the two-year restricted period for that person will commence on the date the person begins to comply with this Section, which may be the date a court order is entered enforcing
this provision. You and your owners expressly acknowledge that you possess skills and abilities of a general nature and have other opportunities for exploiting these skills. Consequently, our enforcing the covenants made in this Section will not deprive you of your personal goodwill or ability to earn a living. The restrictions in this Section will also apply after any transfer, to the transferor and its owners, for a period of two years beginning on the effective date of the transfer, with the force and effect as though this Agreement had been terminated for such parties as of such date.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
According to the 2025 FDD, following the termination or expiration of the Cream franchise agreement, the non-competition covenant restricts the franchisee and their owners from engaging in a Competitive Business for two years. This restriction applies if the Competitive Business is located or operating within the Development Area or within a 5-mile radius of any other Jeni's Ice Creams Scoop Shop. The term "Competitive Business" refers to any business where ice cream or similar frozen products constitute more than 10% of the total gross revenue, excluding other Cream franchises.
This means that a former Cream franchisee is limited in their ability to operate or be involved with a competing ice cream business within their original Development Area or near any other Cream location. The restriction extends not only to the franchisee but also to their owners, immediate family members, and related parties, ensuring a broad scope of enforcement. The covenant aims to protect Cream's market share and brand integrity by preventing former franchisees from leveraging their knowledge and experience to directly compete with the franchise shortly after their departure.
Cream also clarifies that if any individual bound by the non-compete fails to comply initially, the two-year restriction period begins only when they start complying with the terms. This provision ensures that the full duration of the non-compete is enforced, regardless of any initial non-compliance. Furthermore, these restrictions apply to transferors and their owners for two years from the transfer date, as if the agreement was terminated on that date.
Cream emphasizes that the individuals subject to these covenants possess general skills and opportunities, and enforcing the non-compete will not deprive them of their ability to earn a living. This statement is likely included to address potential legal challenges to the enforceability of the non-compete agreement, suggesting that the restrictions are reasonable and do not unduly limit the former franchisee's employment prospects.